The Resilient Entrepreneur, Edition #57
Hi there
I hope you had a great week!
Here are the topics in today's edition:
- Entrepreneurs vs. the Dysfunctional World: Fighting for Value Creation
- My Reading List: What Fuels My Thinking
Please reach out if you have comments, questions, or suggestions for articles!
Talk soon 👋
Tom
KickKerK
LEADERSHIP FOR RESILIENT ENTREPRENEURS
Entrepreneurs vs. the Dysfunctional World: Fighting for Value Creation
Always ask yourself (and others!) if all those nonsense IT security questions and pointless sustainability certificates create value for your business.
Entrepreneurship is all about value creation. Entrepreneurs build products customers want to pay for and set up their teams and processes to make money. Losses are only acceptable when a business grows fast, as investments for growth need to be made before revenues can be materialized.
Business is never linear, so the balance of revenues and costs can get shaken up. That’s when entrepreneurs optimize their revenues and expenses, slashing everything that doesn’t make them money.
So far, so simple. But what’s happening around entrepreneurs in our dysfunctional world? Red tape surrounds every business. Rather than tuning into the chores of Elon Musk and DOGE, here are some specific examples from my experience as the Founder & CEO of Yonder, a B2B SaaS company.
1. IT Security Questionnaires
A significant share of our new business is won through RFPs.
RFPs were originally designed to prevent your cousin from offering sub-standard products at extortionate prices, thus driving down prices and increasing product quality.
We couldn’t be further away from that original idea of RFPs. My regular readers know I have developed a love-hate relationship with anything procurement.
The RFPs we get to answer usually consist of myriad functional and non-functional requirements, often totaling more than 500 individual requirements. Some of those requirements are duplicates but not quite, some are contradictory, and some are downright cover-my-ass.
My favorite is the IT security questionnaire. Here are some absurd but real-life examples I’ve seen in recent RFPs.
“Do you perform pen tests?” Yes, we do this once a year. Can we see the pen test report? Yes, here it is. What date was the pen test performed? Please refer to chapter 1, line 1, and then you will find the date. No follow-up questions.
“Do you have a firewall?” Hell, what do you think? Of course we have a firewall, we’re a SaaS company and it’s not 1995 anymore. No follow-up questions.
“All unused application calls or codes should be disabled or removed where possible.” This is a standard principle in SaaS, so of course we do this. But how would a customer ever check compliance with this requirement?
The point of the story? Neither those questions nor our answers provide any kind of value. If your company is in SaaS, it pays off to be ISO 27001 certified or SOC 2 attested, as all the above questions are not just answered in those certifications, but audited by professionals. Unfortunately, most customers don’t accept the ISO 27001 certificate as an answer to all their IT security questions in an RFP.
2. Compliance
Let’s stay with RFPs for a second. IT security questionnaires are not the only absurd documents you need to go through when you want to win an RFP.
In a recent RFP, we had to obtain a sustainability certificate (and pay for it) to participate in that RFP. With all our servers outsourced, our sustainability efforts are limited to separating trash from recyclables.
But hey, we ticked the box, and we won the RFP. But value add? Zero. Zilp. Nothing.
3. Due Diligence
Let’s switch from RFPs to financing rounds. When you serve B2B customers, bootstrapping a company without outside investment is nearly impossible.
Finding investors is a challenge of its own, but once you find your investors there is the challenge of due diligence. Nearly all institutional investors engage in some form of due diligence to make sure that they invest in a solid company. Whilst it makes sense to ask for the existence of legal disputes, company formation documents, and social contribution payment confirmations, I have seen many silly due diligence questions:
“Can you send a list of nationalities of all your employees?” As if the nationality of employees would make the difference between a good or a bad investment. Asking if all employees have proper residency and work permits would be much more useful.
“Can you send the annual turnover reconciliation with VAT returns?” Guys, you asked for the VAT return statements, the VAT audits, and the audited annual reports before.
“Is the company subject to securities transfer tax?” As mentioned since the first pitch, we are a B2B SaaS company and we do not engage in any securities trading — or any other dodgy business, for that matter.
There would be many more silly due diligence questions to share, but I’ll spare you. Bottom line? Due diligence is not about creating value, it’s about ticking the boxes. Very un-entrepreneurial.
4. Deferred Responsibility
There is something even crazier than due diligence. Some investors use external service providers to carry out due diligence on their investments: One service provider for legal due diligence, another for financial due diligence, and yet another one for tax due diligence. That’s a warranty for double and triple silly questions.
Why do investors do this? They defer the responsibility for the due diligence to a third party.
What do service providers do? Tick as many boxes as they can to limit the liability that has been deferred to them.
What’s the added value for the entrepreneurial ecosystem? Zero.
Conclusion
Let’s go back to the beginning of this article. Entrepreneurship is all about value creation.
None of what I described here creates any value. It just makes the world more dysfunctional. So if we want our thriving entrepreneurial ecosystem back, let’s slash all those elements of red tape.
For the benefit of innovation, and the benefit of us all.
INSPIRATION FOR RESILIENT ENTREPRENEURS
My Reading List: What Fuels My Thinking
Why I prioritize certain books and magazines over endless information noise
Reading is one of my favorite pastimes. Had I more spare time, I would spend a good portion of it reading books and magazines.
Entrepreneurial life is busy, and that’s why I have to apply a strategic approach to my reading: Strategy doesn’t just say what you’re doing, it also says what you are not doing.
Here are the magazines I read regularly, and the books I read recently.
Magazines
1. The Economist
The Economist is my go-to source to know what’s going on in the world. It has a decidedly global and liberal position, which matches well with my core beliefs: As an entrepreneur, I am a strong defender of meritocracy. As an active reserve general staff officer, geopolitics is close to my heart. As an engineer, I like the Technology Quarterly sections and the occasional special reports that broaden my horizon. And as a citizen of a small neutral country, I know that our prosperity comes from being open and liberal, rather than from fencing up our country.
Last but not least, the weekly format keeps me off social media and tabloids for news consumption. I believe it is much better to get well-researched news once a week, rather than being constantly bombarded with trash news.
2. Harvard Business Review
Quality news is one part of the story. As an entrepreneur, I have been living in my own little company world for almost 10 years now. For most problems, I just have what I call “n=1 experience”: My experience is limited to exactly one company.
Although I am convinced that we are not doing too bad a job, my experience is still pretty limited in the wider context.
That’s where the Harvard Business Review comes in. Its articles are well-researched and often include insights from surveying 150+ companies. Reading those articles helps me leave my n=1 bubble at least for a little while.
3. Medium
In contrast to quality news and research results, Medium offers individual views of a wide range of authors on a broad range of topics. Whilst individual views might not always apply to my activities, they have helped me open doors to new approaches, ideas, or subjects I wouldn’t have been able to touch on without Medium.
Medium is my go-to source when I want to learn about a new topic such as setting up a BI platform, AI in compliance management, or migrating our cloud infrastructure to Kubernetes.
Just like Harvard Business Review, the individual views of a wide range of Medium authors help me leave my n=1 bubble when getting immersed in a new topic where I have zero or very little knowledge.
Books
Looking back on my journey as the Founder & CEO of Yonder, a B2B SaaS company, three books perfectly illustrate the three key challenges of building a SaaS company:
- Selling your product
- Building your product
- Growing the user base of your product
Before we start looking at these three challenges, let me add a personal note.
In my humble view, there are only two ways to start a B2B SaaS company. Either you sleep in the server room, building a product and praying that somebody will ever buy it. Or you run around selling a product that doesn’t exist yet and build it once a first customer confirms interest.
We chose the second option. That’s the reason I read the following three books in the order, as outlined below.
1. Selling your product
Entering Startupland by Jeffrey Bussgang describes all commercial functions a young company needs, and how they evolve when the company grows.
I love the terms “jungle”, “dirt track” and “highway” to describe a company’s stage. This is helpful, as not all commercial functions are needed in the “jungle” or “dirt track” phase yet. Focus is key in any startup, so knowing in which phase your company is and using plain terms for it makes a lot of sense.
The book also gives an unvarnished insight into what startup life is really about, providing helpful guidance for hiring and new hires. When selling B2B, new hires often come from larger companies, and they often need a cultural adjustment when joining a startup.
2. Building your product
Building Great Software Engineering Teams by Josh Tyler describes how to recruit, hire, and manage the engineering team that builds your product.
My favorite chapter in the book describes why Josh Tyler doesn’t allow Java in technical interviews. He argues that just because Java can be used for almost anything, it’s often not the best choice. Engineers who know only about Java aren’t curious and learnable enough to thrive in today’s fast-moving, full-stack software universe.
The technical and commercial functions in a SaaS company often have very different priorities, interests, and mindsets. As the CEO of a SaaS company, I am spending time on both the technical and commercial side, trying to balance the two sides.
3. Growing the user base of your product
The Cold Start Problem by Andrew Chen bridges the technical and commercial sides of a SaaS company. It’s all about growing the user base of your product, using examples from well-known companies such as Slack, Tinder, Uber, and more.
Growing users is all about creating network effects. To understand what a network effect is, consider the telephone: The value of the telephone system increases exponentially with the number of users joining the network. It’s the same for all SaaS products that require interactions between users.
Here, the commercial and technical sides of a SaaS company come together. What unique feature could we throw into the market to reach the tipping point of increasing numbers of users beyond all expectations? How hard will it be to build this feature, and what tech talent do we need to accomplish this?
Conclusion
There is one last book I would like to recommend to busy entrepreneurs.
Four Thousand Weeks by Oliver Burkeman painfully reminds readers how finite our time on Earth is. It reminds us how little we leave behind once we’re gone — I love the term “cosmic insignificance”.
As an entrepreneur, it’s good to be bold. It’s good to be convinced that you can achieve the imaginable. But never forget how insignificant you are in cosmic terms.
About Me
Growing a company 📈 in uncertain times 🔥🧨 is like running a marathon—it demands grit, strategy, and resilience.
As a tech entrepreneur 💻, active reserve officer 🪖, and father of three 👩👦👦, I share practical insights and experience on entrepreneurship and resilience in The Resilient Entrepreneur, my weekly newsletter.
When I'm not solving problems, I recharge and find inspiration in the breathtaking mountains 🏔️ around Zermatt 🇨🇭.
Like this newsletter? Please share it with your friends!
